Aug 20, 2013 at 12:00am ET By

Throughout the world, international economic woes have driven the cost of a college education up significantly, and the few remaining types of scholarships and grants are far harder to get than ever before. That leaves most current or would-be college students in the position of having to take out student loans in order to pay for school.

A June 22, 2013 article in the Los Angeles Times noted that the total student loan debt currently exceeds $1.1 trillion, and that coupled with the high default rate of 13.4 percent is creating long-term credit problems for those who owe money. Sadly, the problem of student loan debt isn't unique to the United States.

 

United Kingdom 

An April 22, 2012 article by Oliver Staley for Bloomberg revealed that because of a new plan the British government planned to implement beginning with the 2012-2013 academic year, many English students would find themselves owing huge amounts of money after the government decided to shift the burden of paying for higher education onto the shoulders of students themselves.

The report further explained that by the time some British students graduate from college, they will owe as much as £40,000 (the equivalent of $64,200 USD,) to pay back what they borrowed to cover fees, textbooks and tuition. That amount of debt would have a British college student owing $45,900 more than a student in the United States, who would owe an average of roughly $23,000.

A July 3, 2013 report for WSWJ by Jordan Shilton disclosed news of a governmental secret report that described plans to sell the debt on student loan debt that was taken out from 1998 to 2012, to private investors. The creators of the plan hope that private investors will take over an estimated £40,000 worth of debt on loans that were issued during those 14 years. The report added that after seeing the document, The Guardian confirmed its contents.

An increase on student loan interest rates would serve as an incentive and pre-condition to get private financial institutions to assume the debt. The current overall interest rates, which were established by the Bank of England are only 1.5 percent, an amount that investors would deem far too low to make it worth their while to take on the risk.

Although these measures have yet to be established, the impact would be devastating for an estimated 3.6 million people who borrowed money to cover higher education costs from 1998 to 2012. Students who took out loans in excess of £40,000 to start school in 2012 may be forced to pay interest rates at more than double what they expected to pay. The impact of these changes would be further compounded if the government decides to lower the yearly income threshold at which repayment begins from £21,000 to £18,000.

The saddest consequence of these changes is seen between 2007 and 2011 when the suicide rate among full-time college students increased by 50 percent. These numbers are likely due to financial concerns and fear that things will only get worse in the future. Men are at greater risk for suicide.

 

United States

Within the last year, the average tuition increase at public universities was roughly 15 percent, with an average net price increase of 4.6 percent. For private undergraduate institutions, the average tuition increase for last year was 9.7 percent, and the average net increase was 6.1 percent. 

According to the most recent available data (which only covers the 2007-2008 academic year,) from the National Center for Educational Statistics, 65.6 percent of undergraduates attending colleges or universities in the United States received some type of financial aid. Of that financial aid, 48.2 percent came from federal financial aid programs while 48 percent came from sources other than the federal government. 

Over half of the students (51.7 percent) who got some type of financial aid received grants. The grants (scholarships that don't have to be repaid,) came from both federal and non-federal programs, out of which 27.6 percent was distributed from federal financial aid programs and 38.5 percent came from non-federal governmental programs. Another 38.7 percent of the financial assistance that students received came from loans out of which 34.9 percent were federally funded and 14.8 came from other sources.  

Regardless of whether they attended private or public four year colleges, by the time the class of 2011 graduated, 66 percent of the students were in debt, and the average amount of student loan debt was $26,000. That debt doesn't include the additional interest that borrowers will have to pay back for the more than 20 years it will take them to repay that debt.

When it comes to repaying the loans, varying interest rates and the amount that a student borrowed will determine what their monthly payments will be to repay the loan. Consider too, that the longer a student takes to repay the loan, the more interest they will have to pay on it.

Students who began college before the economic collapse and the government financial crisis now have to worry about repaying their student loans. With few job prospects for college graduates and a very bleak job outlook for the foreseeable future, college graduates are justifiably anxious and concerned. Student loan debt in the United States currently exceeds $1.1 trillion, and an estimated 13.4 percent of that money is owed by students whose enormous student loan debt balances lie within a $54,000 to $100,000 range. Not surprisingly, the current default rate is a staggering 13.4 percent.

 

Canada

Canadian college students also feel anxious about the prospect of having to borrow money to pay for school, and about their ability to pay it off once they graduate. The findings of the Pollara-conducted BMO 2012 Student Survey were released on August 17, 2012. That survey looked things that caused the most stress and anxiety for the respondents.

The biggest stressor was figuring out how to pay for their college education. Most of the students indicated that they expected to owe over $20,000 upon graduation, and slightly under half (41 percent,) indicated that it would take them well over five years to repay the debt.

Canadian government research shows that a year of college (when including all expenses – including housing, textbooks, supplies, tuition and other expenses,) is roughly $14,500 a year. Four four years, that would be a grand total of $60,000, which is much less than what students in the United States pay for college. The average cost of a year of college in Canada runs about $5,366, according to Statistics Canada.

Between 2008 and 2011, the percentage of Canadian college graduates who were employed dropped to 73.7 percent from 2008's high of 75 percent. The unfortunate reality was that there weren't enough jobs to keep pace with the increased number of college graduates.

 

Australia

Australia has $15 billion worth of unpaid student loan debt, out of which the government anticipates that $4 billion won't ever be repaid. Unlike either the United States or Canada, there is no fixed interest rate on student loan debt in Australia. The country adds the total debt to the Consumer Price Index. Repayment is based on income. As of 2010, Australia's CPI was 3.5 percent.

Graduates who make less than $45,000 aren't required to start repaying the debt until their salary reaches the minimum requirement. Individuals whose annual salary exceeds $84,300 are required to repay 8 percent while individuals who make $50,000 up to the $84,300 threshold pay 4 percent. The average cost of a year of college in Australia is $7,692, as of 2010. As of 2010, Australia's unemployment rate was 5.4 percent, but it has increased to 5.8 percent (as of June 2013.) These figures are a bit deceptive because they fail to include people who stopped looking for work because they got so discouraged.

 

Student loan debt is an international phenomenon. The global economic problem is only going to make this crisis worse. As countries throughout the world try to grapple with their own budget deficits and financial crises, the impact of necessary budget cuts will trickle down to programs that provide college students with financial assistance to help them pay for school.

That may also mean that government sponsored and subsidized student loan programs may be privatized. Higher unemployment rates, coupled with lower paying jobs with limited benefits will only contribute to a worsening of this devastating situation.

As the cost of a college education rises steadily throughout the world and financial assistance diminishes, young people who want to go to college may be forced to take out student loans. Most developed nations in the world are reeling from their own economic disasters. Increased interest and tighter restrictions on student loan eligibility coupled with limited job opportunities after college may force would-be college students to reconsider their educational goals and plans.

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